How Accurate Is Your Home’s Online Estimate?

Ever wonder how reliable and consistent computer-generated data is when it comes to home valuation?

Who hasn’t checked out online real estate sites for price estimates of your home, a neighbor’s home, or even that fancy beach house when you’re on vacation? It’s fun to see what different properties might be worth, even if you’re not in the market.

It’s easy to realize why these sites and apps are tempting to use since buyers, sellers, and the Average Joe can immediately get information to satisfy their curiosity.

However, keep in mind, these estimates are not as accurate or as consistent as you may think.

That’s why you shouldn’t insist your home be priced like your favorite online estimate – you could overprice it and your home could sit too long on the market without any interested buyers OR you might see a disappointing number online that might be too low given today’s buyer demand.

Here are 5 reasons why online estimates shouldn’t be your only resource for pricing a home as a seller or when scouting homes as a buyer.

Here’s what these sites are doing:

1.  Calling estimates a “starting point” when determining a home’s value.  What does that even mean? It means to get a more accurate analysis of what your home is really worth, a licensed professional, such as a real estate agent (like me) or an appraiser needs to actually see the inside of your home.  Why?  Because every home is different, from it’s location in the neighborhood to what upgrades have been done and how it compares to the most recent sales. On top of that, buyer demand often commands prices, higher or lower, than what the most recent sales would suggest.  You need someone who knows what’s going on behind the scenes to bring this information to the pricing discussion. 

2.  Relying on data and information and not their own assessment of a home. These estimates are calculated by using public and any user-submitted data or corrections. They don’t do a physical inspection of a home, so if there are any inaccuracies in the public information, it can’t be corrected.  Square footage from the tax records, for example, are notoriously incorrect and that is a huge factor in an online assessment of your home. For example, if you’ve added any square footage to your home that is not reflected in the tax records, your online estimate will be incorrect. 

3.  Lacking direct knowledge about the local market or your particular neighborhood. Certain neighborhoods can be really hot and in high demand, but just a few blocks over in another neighborhood, prices start to drop. An online estimate can’t differentiate neighborhoods as much as you might think. They use data from an area much larger than your neighborhood. Many times, they use sales data from an entire county to extrapolate changes in the housing market.

Plus, their systems don’t take into consideration the condition of other homes on the street, if there is a feature your home has that others don’t, or even if the home is on a busy road. That’s why it’s best to have a professional physically go to your home, look around, and put together a market analysis showing you how your home compares to others. 

4.  Determining calculations based on a computer system not a licensed professional. Computers are helpful for so many things, but they lack the ability to pick up the nuances that really change the value of a home, which is why when it comes to accurate pricing, human insight wins over technology. Online calculations are based on an algorithm that can only use quantifiable data and not anything subjective – like the quality or the appeal of a home.  It can’t “systematically gather and verify” certain information, such as a flat backyard that’s great for entertaining or adding a pool, new marble countertops and amazing cabinets, or an outstanding primary suite.

Computer-generated estimates are based on the number of bathrooms or bedrooms, but nothing descriptive about them. Sure, you want to know how many bedrooms a home has, but what about how roomy they are, the size of the closets, and the amount of light from windows? You know what’s special about your home in a way that a computer never will.

5.  Showing uncertainty by providing a Value Range consisting of a high estimate to a low estimate. For example, if the estimate is $300,000, it could have a Value Range of $260,000 – $340,000.  For another $300,000 home, the Value Range could be $285,000 – $320,000. See how the second range is narrower and closer to the estimate?

The wider the range indicates that less data is available for the final calculation. A smaller range between the prices means there was more information available to generate the estimated value. So, keep that in mind when looking at estimates and realize that there might not be enough data available for the most accurate estimate.

Summary of Online Estimates

As you can see, it can be “fun” to look at online estimates to satisfy your curiosity, but please don’t depend on them it’s time to price your home.

If you want to know what your home is worth, even if you aren’t selling anytime soon, call me. I can do a quick walk-through of your home and provide a more accurate number for you at no cost.